Nintendo slashes profit forecast 70% on weak 3DS, Wii demand

Pressure is on for Wii U, which Nintendo expects to sell 5.5M through March.

Back in April, Nintendo said it was counting on increased 3DS sales and profitability to help turn around the first full-year loss in the company's history. Today, Nintendo admitted that demand for its latest portable and the aging Wii continue to lag behind expectations, dragging down profits.

It's not like the 3DS is a Virtual Boy-level failure—the system did sell over 5 million units worldwide in the six months through September, including 2.1 million sales for the well-designed 3DS XL. First-party titles like New Super Mario Bros. 2, Super Mario 3D Land, and Mario Kart 7 continue to sell in the millions as well.

But Nintendo still lowered 3DS sales expectations for the full fiscal year, which ends in March, from 18.5 million to 17.5 million, reflecting increasingly tough competition from mobile and tablet games. The outdated Wii also continued its long sales decline, selling only 1.3 million units in the last six months due to what Nintendo admitted were "few new title releases." The company cut full-year sales expectations for the Wii drastically, from an expected 10.5 million in April to 5 million today.

Nintendo still says it expects to return to profitability this fiscal year, but the weak performance over the last six months led to an abrupt 70 percent cut in that profit forecast, to ¥6 billion ($75.2 million). Even that revised number seems a bit optimistic, given that the company lost ¥27.99 billion ($350.8 million) over the last six months. Nintendo continues to blame tough international exchange rates in part for the poor performance, but that likely wouldn't matter much if the Wii and DS line were selling like they did in their heyday.

All eyes are now on the impending launch of the Wii U to turn Nintendo's fortunes around. The gaming giant now says it expects to sell 5.5 million Wii U systems through March, along with 24 million pieces of Wii U software—just over four games per customer. Nintendo had better hope it meets those expectations, because another annual loss could easily lead investors to lose faith in the once-dominant company.

The LTD attach rate on the X360 up through Q3 2012 is 9.2 from the NPD (I presume this doesn't include downloaded titles). Based on NPD reports from 2010-11 the PS3 is in a similar ballpark.

9.2 pieces of software per console since LAUNCH. So an attach rate of roughly 9 after 6+ years between the two consoles.1.5 titles per year.125 titles per month

Now, normally you'll get at least one game with a new console (though arguably with the wii, a lot of people just spent the time bowling with the included title). But even if Nintendo has a guaranteed day 1 attach rate of one, if you're hitting 5+ million units, statistically it would be VERY hard imo to have an attach rate of 4 after 5 months.

314 posts | registered Sep 21, 2007

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Kyle Orland
Kyle is the Senior Gaming Editor at Ars Technica, specializing in video game hardware and software. He has journalism and computer science degrees from University of Maryland. He is based in the Washington, DC area. Emailkyle.orland@arstechnica.com//Twitter@KyleOrl

90 Reader Comments

Nintendo doesn't really have anybody to blame but themselves. In the past they could rely on their strong repertoire of first-party titles to at least keep them in the public eye. These days Nintendo barely puts any games out themselves. When was the last time we had a full-fledged Star Fox or F-Zero? Nintendo has a massive backlog of well-known properties they should be using to their advantage. A number of Japanese companies are like this. They have a lot of IP but they don't seem to know what to do with them. They proclaim they want to be more like their western counterparts, like Activision and EA, but they always seem to forget that the Japanese market was strongest when they were actually developing games.

1. Port existing Mario/Zelda/Pokemon DS game library over to iOS/Android.2. Charge a modest premium for these games in their respective marketplaces ($5 - $15).3. They are virtually guaranteed multi-million copy sales.4. Profits roll in.5. Everyone forgets how bad the 3DS and WiiU sold.

The LTD attach rate on the X360 up through Q3 2012 is 9.2 from the NPD (I presume this doesn't include downloaded titles). Based on NPD reports from 2010-11 the PS3 is in a similar ballpark.

9.2 pieces of software per console since LAUNCH. So an attach rate of roughly 9 after 6+ years between the two consoles.1.5 titles per year.125 titles per month

Now, normally you'll get at least one game with a new console (though arguably with the wii, a lot of people just spent the time bowling with the included title). But even if Nintendo has a guaranteed day 1 attach rate of one, if you're hitting 5+ million units, statistically it would be VERY hard imo to have an attach rate of 4 after 5 months.

I'm tired of seeing people repeat this sentiment. The WII wasn't an underpowered gimmick console--it was a low-powered console targeted towards young children/relaxed multiplayer games. And for that, it was perfectly suitable. My kids still play it, though a lot less than they used to now that we been buying Humble Bundle games for the PC/laptop.

And speaking of the HumbleBundle games, I think that's where Nintendo screwed up with the Wii. If they had made the games a reasonable price, their marketplace could have been a great resource for new, interesting games (e.g. World of Goo).

Distribution of games don't require separate hardware anymore. You don't need a handheld nor a cartridge to deliver the software. You're using an antiquated distribution model that's being undercut by their competitors. Recognize your model doesn't work for the company make the appropriate changes. They're too fat to move at this point.

Unless Nintendo figures out a way for my dog to start playing games with me, there will be no console sharing. Being that Nintendo wants to focus on console shared group gaming, the Nintendo systems obviously aren't intended for me, or else I would be able to play a game with a friend in another state without me wanting to just go back to the xbox and play something that works.

So many people in these Nintendo threads seem to confuse their preferences with market preferences. You don't want to buy a console because you have a smartphone that's capable of playing games? Good for you, millions of people don't.

Consoles never really sold that well, the iPad has sold 100 million since 2010, the Wii has only sold 100 million since 2006.

Nintendo doesn't really have anybody to blame but themselves. In the past they could rely on their strong repertoire of first-party titles to at least keep them in the public eye. These days Nintendo barely puts any games out themselves. When was the last time we had a full-fledged Star Fox or F-Zero? Nintendo has a massive backlog of well-known properties they should be using to their advantage. A number of Japanese companies are like this. They have a lot of IP but they don't seem to know what to do with them. They proclaim they want to be more like their western counterparts, like Activision and EA, but they always seem to forget that the Japanese market was strongest when they were actually developing games.

There's a fine line between regular releases and over-saturation (think Activision and COD/GH). Their brand means everything to them, and you can't hurt the reputation. Activision can buy up new IPs when they are done wringing another dry, Nintendo has to be careful with what they made.

Nintendo is going the way of Sega. I've been saying this ever since the iphone3gs.

Don't downvote simply for disagreement.

I'll downvote for whatever reason I want. In this case, Sega had 5 consecutive years of big losses, starting the year it launched Dreamcast. Meanwhile Nintendo is slumping on Wii's end of life, and after first year of loss is projecting profits for this fiscal year. Their fiscal year ends in March, so plenty of time to sell Wii U and turn the year around.

They may end up going the way of Sega eventually, but your prediction back in 2009 had very little basis in fact.

First, most Ars commenters seem to think that Nintendo is struggling to stay afloat and should move to mobile ASAP. This is not accurate, Nintendo is sitting on a huge, huge, pile of cash.

Second, the notion that Nintendo should put games on Mobile no matter what. Unfortunately, there's no mobile device that provides the same input methods as the 3DS does (analog, d-pad, buttons and stylus-based input on a separate touchscreen) by default, so moving games like Super Mario 3D Land to, let's say, iOS would require re-thinking the game from scratch.

Nintendo relies heavily on the tight integration between hardware and software, and from my perspective, putting games on mobile would mean losing that: They'd be forced to make games they don't do, sell them at a much lower price and lose hardware profits... Still I see this idea mentioned over and over again like it's a good thing?

I own an Android phone (Razr MAXX) an Android Tablet (Motorola Xoom, but I'd like to replace it soon since it runs dog slow), a DS (multiple actually, it was nice having a disposable income), and multiple 3DS' (again, disposable income). I love all of them, and don't even mind carrying around the 3DS. The problem I have with it at the moment is that there haven't been a lot of games released for it that interest me at all. I guarantee that when they release a Pokemon on the 3DS, it will boost sales a LOT.

While I love my Mario games, I prefer games that I can play without a time crunch while I'm on the move. Things like RPGs or puzzle games fit that spot perfectly. The main time I use portable gaming is when I have nothing to do while I'm away, but I need the ability to keep my attention on other things (like eating out, or waiting for something to complete). If there were more options along those lines on the 3DS, I'd certainly use it more.

I'm one of those that likes having a dedicated device (I still use a digital camera too) because those devices are tuned to those uses.

I may have different views on devices, but I do also know how a dedicated device improves the capabilities and quality of the task I'm trying to accomplish.

There's a fine line between regular releases and over-saturation (think Activision and COD/GH). Their brand means everything to them, and you can't hurt the reputation. Activision can buy up new IPs when they are done wringing another dry, Nintendo has to be careful with what they made.

Granted, but the fans have been pining for new releases of their favorite properties for ages. That we only get one or two new entries in an established series per console generation most of the time (except for Mario) is disappointing, to say the least. It feels as if we have to wait years to see if Nintendo's learned from their mistakes the last time around.

I would absolutely hate it if Nintendo fell into a yearly release schedule, but I think we're far past the point where it's acceptable for Nintendo to be putting out only a handful of major releases every couple of years. With the WiiU they're claiming that they want to cater to the demographic they've steadily been losing since the Wii but so far I'm not seeing much in the way of actual game announcements. If Nintendo doesn't start showing us some material then they should only expect dropping profits.

Games like Kid Icarus Uprising show us that Nintendo still has it in them to make great games with modern production values. It's just that they aren't doing it often enough to justify long-term purchases of their systems.